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EARNINGS REVIEW
Container Corporation of India (CCRI.BO)
Sell Equity Research
Above expectations: Volume growth continues to disappoint; Sell
What surprised us
Concor reported 1QFY12 net profit of Rs2.3 bn, 12% higher than our
estimates and 7% higher than Bloomberg consensus estimates. Though
sales were below our estimates, driven by weak performance on volumes,
better cost control and higher non-operating income led to higher-thanexpected net profit. Exim volumes were higher by only 2% yoy, vs
management’s expectations of 7-7.5% growth, while domestic volumes
declined 13% yoy as the increase in haulage charges continued to lead to a
loss in volumes in this segment.
What to do with the stock
Increasing competitive pressure in the Exim segment and decreasing lead
times, driven by the shift in traffic from the JNPT port to Mundra and
Pipavav, continue to be key structural concerns for the company, in our
view. We thus reiterate our Sell rating on the stock. We forecast a 6%
increase in Exim volumes for the company vs management’s expectations
of 9% yoy growth in FY12E. We raise our FY12E-13E EPS estimates by 1-
2% after adjusting for the lower tax rates and higher non-operating income
reported in 1QFY12. We also introduce our FY14E EPS estimate of Rs82.59.
In line with our forecast revisions, we raise our P/E-based 12m TP to
Rs1030 (vs Rs1007 earlier); this implies downside of 10% from current
levels. The stocks currently trades at FY12E P/E of 16.3X, a premium to its
7-yr historical median of 15X. Key risks: 1) policy changes to increase the
attractiveness of rail freight vs. road freight, a 2) sudden pick up in lP
growth and manufacturing.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Container Corporation of India (CCRI.BO)
Sell Equity Research
Above expectations: Volume growth continues to disappoint; Sell
What surprised us
Concor reported 1QFY12 net profit of Rs2.3 bn, 12% higher than our
estimates and 7% higher than Bloomberg consensus estimates. Though
sales were below our estimates, driven by weak performance on volumes,
better cost control and higher non-operating income led to higher-thanexpected net profit. Exim volumes were higher by only 2% yoy, vs
management’s expectations of 7-7.5% growth, while domestic volumes
declined 13% yoy as the increase in haulage charges continued to lead to a
loss in volumes in this segment.
What to do with the stock
Increasing competitive pressure in the Exim segment and decreasing lead
times, driven by the shift in traffic from the JNPT port to Mundra and
Pipavav, continue to be key structural concerns for the company, in our
view. We thus reiterate our Sell rating on the stock. We forecast a 6%
increase in Exim volumes for the company vs management’s expectations
of 9% yoy growth in FY12E. We raise our FY12E-13E EPS estimates by 1-
2% after adjusting for the lower tax rates and higher non-operating income
reported in 1QFY12. We also introduce our FY14E EPS estimate of Rs82.59.
In line with our forecast revisions, we raise our P/E-based 12m TP to
Rs1030 (vs Rs1007 earlier); this implies downside of 10% from current
levels. The stocks currently trades at FY12E P/E of 16.3X, a premium to its
7-yr historical median of 15X. Key risks: 1) policy changes to increase the
attractiveness of rail freight vs. road freight, a 2) sudden pick up in lP
growth and manufacturing.
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